100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Summary FAC3704 Summarised Study Notes R50,00   Add to cart

Summary

Summary FAC3704 Summarised Study Notes

 44 views  4 purchases

Latest summarized notes for exam preparation. for assistance. All the best on your exams!!

Preview 4 out of 35  pages

  • Yes
  • December 29, 2021
  • 35
  • 2022/2023
  • Summary
book image

Book Title:

Author(s):

  • Edition:
  • ISBN:
  • Edition:
All for this textbook (7)
All documents for this subject (79)
avatar-seller
iStudy
FAC3704

NOTES

, Page |1
Learning Unit 1 & Vol 1
1. A GROUP OF ENITIES AND ITS FINANCIAL STATEMENTS - CHAPTER 1 GS
CONTROL IFRS 10
 IFRS 10 requires that the investor determine whether it is a parent of the investee.

ELEMENTS OF CONTROL:
1) Power over Investee
2) Exposure, or rights to, variable return from involvement with the investee
3) Ability to use power over investee to affect the amount of the investor's returns.

1) Power comes form rights:
 voting rights
 rights embedded in a contract

Rights that gives an investor power:
 Voting rights through owning equity
 Potential voting rights
 Rights to appoint, reassign or remove key management positions that have the ability to direct the relevant
activities
 Rights to direct the investee to enter into or veto any changes to, transactions for the benefit of the
investor
 Other rights that give the holder the ability to direct the relevant activities

2) Exposure/rights to variable returns:
 To control an investee, the investor must have exposure or rights to the variable returns of the investee
from its involvement with it
 Returns include: dividends, other distributions embodying economic benefits (e.g interest on loans),
remuneration for services, fees and exposure to losses from providing credit/liquidity/other financial
support and returns through synergy benefits.

3) Link between POWER and RETURN:
 A parent must not only have power over and investee and exposure/rights to returns - BUT it must ALSO
have the ABILITY to USE its POWER over the investee to AFFECT its RETURN from its involvement with the
investee.

GROWTH
 Company itself can grow
 Can combine with other entities




After studying this learning unit, you should be able to prepare group financial statements as at the
date of acquisition according to the requirements of the International Financial Reporting Standards
(IFRS).

, Page |2
Learning Unit 1 & Vol 1
SHARES, THE CAPACITY IN WHICH THEY ARE HELD AND VOTING RIGHTS
I.T.O THE COMPANIES ACT, 2008

 Every share, regardless of its class, has associated with it one general voting right, unless provided for
otherwise by
o Companies Act
o Preferences, rights & limitation etc as determined by the MOI
 To determine whether a person controls all or a majority of the voting rights, voting rights which are only
exercisable in specific circumstances must only be taken into account when those circumstances arise and
for as long as they continue
 Voting rights exercisable on the instruction of another are treated as being held by a nominee for that
other person
 Voting rights held by a person in a fiduciary capacity are treated as being held by the beneficiary of those
voting rights.
 Every share has associated with it an irrevocable right of the shareholder to vote on any proposal to amend
preferences, rights and limitations and other terms.

The acquisition of a shareholding in another entity can result in one of the following: SG p9
 Where the investor (the entity which acquired the shareholding in another entity) exercises some form of
control over the investee, the investor is the parent of the investee, which is called its subsidiary.
 The investee is an associate of the investor if the investor exercises significant influence over the investee.
 If two or more entities hold shares in an investee and have joint control of the investee in terms of a
contractual arrangement, the investor is in a joint arrangement with the other investor.

Group (FAC2602)
 Where a parent is linked with a subsidiary to form a larger economic unit, it is customary to refer to
the entity as a group.
 The basic characteristic of such a group is that the management of the different independent parent
and subsidiary entities comprising the group is co-ordinated in such a way that they are managed on a
central and unified basis in the interest of the group as a whole.
 This management on a unified basis is possible because of the control which the parent exercises over
its subsidiaries.




After studying this learning unit, you should be able to prepare group financial statements as at the
date of acquisition according to the requirements of the International Financial Reporting Standards
(IFRS).

, Page |3
Learning Unit 1 & Vol 1
GROUP STRUCTURES

Simple Group example:
1 Parent and 1 Subsidiary:
P Ltd
51% P determined that it controls S through
holding the majority of the voting rights
S Ltd by virtue of holding 51% equity

Complex group example: P is the Parent
P Ltd
S1, S2 & S3 are fellow subsidiaries of P
S1 Ltd S2 Lted S3 Ltd
SS1 Ltd is a subsidiary of S2 Ltd, which is
also a subsidiary of P, therefore SS1 is also
SS1 Ltd
a subsidiary of P

Vertical Group
P Ltd P Ltd hold 51% of shares in S Ltd and S Ltd hold 51%
in SS Ltd - therefore S Ltd is a subsidiary of P Ltd,
51%
S Ltd which is the parent - P is able to direct the relevant
51% activities of S.
SS Ltd
SS is a subsidiary of S, which is the parent as S has
the ability to direct the relevant activities of SS

P is also the parent of SS as SS is controlled by S
which is controlled by P




Simple group with spread shareholding 1
P Ltd P Ltd owns 48% in S Ltd. S has no other classes of shares the remaining shares
48% are held by 1 000 minority shareholders and no shareholder agreements exist
S Ltd between those shareholders to make collective decsions.

S is therefore a subsidiary of P, which is the Parent - P can exercise power
through its 48% shareholding - the relative size of the other shareholders'
interests gives P a large enough dominant voting interest to meet the power
criteria.




After studying this learning unit, you should be able to prepare group financial statements as at the
date of acquisition according to the requirements of the International Financial Reporting Standards
(IFRS).

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying this summary from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller iStudy. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy this summary for R50,00. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

79373 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy summaries for 14 years now

Start selling
R50,00  4x  sold
  • (0)
  Buy now